Medicare Advantage “Overpayments”—Not As Simple As It Seems

Bill Boyles, Publisher of Health Market Survey, gives us another insider's view of the day-to-day debate over the appropriateness of the Medicare Advantage payments to HMOs.

It seems that when you have seen one Medicare Advantange Plan you have seen one Medicare Advantage Plan. The "overpayments" reported by MedPAC and the CBO are nowhere near across the board.

The debate is clearly getting into the nitty gritty. But with many leading Democrats so focused on rolling back the Republican privatization of Medicare, will it matter?

Here's Bills latest message from deep inside the Beltway:

MEDPAC Still Wondering About MA Plan Rate Cut

The MEDPAC conclusion that Medicare Advantage (MA) plan rates should be cut by $65 billion to mimic fee-for-service spending is being revisited in MEDPAC private meetings, HMS sources reported this week. The problem for MEDPAC is that there are multiple very large and very small contractors who can prove conclusively that they are not being paid more than fee-for-service by anybody’s calculations.

This means if Congress insists on cutting MA rates across-the-board to finance a massive expansion in SCHIPs for healthy children, the plans which are not supposed to be part of the target will be thrown into the pot. That’s a problem: tons of the so-called “guilty” plans [who are arguably overpaid] are in rural areas where fee-for-service cost is simply way-low, and many of the “innocent” plans [those not getting excessive payments] are often in the inner cities and will also be cut.

“They don’t want to cut the plans they now see are not overpaid,” a lobbyist said. But if they simply exempt the innocent plans “there would be a huge bloodbath.”

MEDPAC is not the only one finding this out. Other leading independent think tanks have been holding private meetings for two weeks with leading companies now giving them actual rate data sheets never seen before. In all cases we are hearing that it is an eye-opener – it was assumed all rates over excessive and all MA plans were being overpaid. That is clearly and provably not the case.

Unfortunately, this all may still mean squat when push comes to shove in late November when the final deals will be cut. But it could also indicate a slight glimmer of hope that the whole thing will bog down just like what is now happening with the immigration bill--which everyone predicted would pass this year but is now stuck in the Senate. Or another fallback, a 5-year phase-in like under risk adjusters.

It’s just starting to feel different. Could be nothing, or everything.